Safeway undertakes largest store revamp in Bay Area in years

Safeway is embarking on its most far-ranging effort in years to replace or reconstruct aging or small stores, the Pleasanton-based retailer said Tuesday.

The series of projects will effectively create 13 new or revamped Safeway stores in the Bay Area. The retailer has 158 stores in the Bay Area. Safeway's push comes amid the backdrop of an invasion by smaller rivals competing for shoppers' dollars in a region that Safeway has long dominated.

"The economy has turned and that has opened up more opportunities in urban areas," said Karl Schroeder, president of Safeway's Northern California Division. "Previously a lot of the new stores were on the fringes of the division."

Schroeder added that this is the largest store replacement and reconstruction effort "in years."

"Our experience with our new East Bay and Bay Area locations is we have had very favorable customer reaction so far," said Brendan Wonnacott, a spokesman for Fresh & Easy. "Customers are looking for more fresh food options, more wholesome foods they can afford."

"The competition is getting more fierce," said Patricia Edwards, chief investment officer with Seattle-based Trutina Financial. "You have a lot of new players coming into the market, and some existing players ramping up their food offerings."

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Target is adding grocery units in more of its stores, Walgreen's is adding a small food section in its drug stores, and Wal-Mart has been adding grocery operations in its outlets.

Safeway is also jumping into attractive locations that once were occupied by other retailers:

Pleasant Hill. Safeway is going into a former Mervyn's;

Campbell. Safeway has just opened a store at a one-time Mervyn's;

Petaluma. Safeway plans to open in 2012 at a shuttered Mervyn's;

Mountain View. Safeway has struck a deal to occupy a former Sears store at San Antonio Plaza;

El Cerrito. Safeway this month will open in a one-time Target site.

In some instances, a realty unit of Safeway, Property Development Centers, is building or reconstructing a shopping center that would have the supermarket as one of its primary tenants.

That's the case in Pleasanton, where Property Development is building a 58,000-square-foot Safeway that will anchor a mall that's also under construction.

In Oakland's Rockridge district, at 51st and Broadway, a large new Safeway will be built and the surrounding shopping center will be completely remodeled.

"We will completely tear down and rebuild the Rockridge Shopping Center, double its size and add a completely new full-service Safeway store," said Dave Zylstra, chief operating officer of Property Development Centers.

A number of the projects will replace stores that have existed for decades.

"One of the big things with retail is you have to constantly refresh or go stale," Edwards said.

In Los Gatos, Safeway plans to open its new on-site replacement of an existing store. In Burlingame, Safeway has nearly completed construction of a big store that completely supplants a tiny older store. In Millbrae, the grocery chain is planning to tear down and reconstruct an existing small store.

"Even though it seems like there is a blast of these new openings right now, these are very well-thought-out and deeply analyzed projects," Schroeder said.

Some store neighbors in Berkeley and Oakland have protested the Safeway upgrades.

At a May 19 meeting of the Rockridge Planning Council, Oakland city planner Darin Ranelletti summarized the diverse community views about the reconstruction of the Rockridge Center and Safeway store.

"A lot of people hate it, a lot of people love it, some are in the middle," Ranelletti told the attendees. "It's all over the place." His comments were posted on the Internet site of the Rockridge Planning Council, which is a focal point for community input about the Safeway project.

Still, Safeway may have little choice but to launch these upgrades and new stores.

"Safeway is being attacked on all sides because everyone thinks they can do grocery stores," Edward said. "Safeway has to prove they can do it better than these up-and-comers."